Two-wheeler makers pushing excess stock, says FADA

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New Delhi | Published: September 4, 2019 3:59:30 AM

While most manufacturers have been cutting production since January this year, dealers say a steeper cut in output is required for stock levels to come down to normal at 25-35 days.

Auto industry, Auto industry news, Auto industry slowdown, Auto industry news 2019Bajaj Auto’s output was higher by 2% y-o-y while TVS Motor Company’s production was down by 16% . In the April-June quarter too, production of all manufacturers was down by 10-20%.

Despite slump in retail, two-wheeler manufacturers, including Hero MotoCorp and Honda Motorcycle, are not cutting down on production as much as it is required to bring down the high levels of inventory, the Federation of Automobile Dealers Association (FADA) said on Tuesday.

Ashish Kale, president, FADA, said while passenger vehicle manufacturers have managed to bring down the inventory to around 30 days, two-wheeler inventory is still at around 60 days. “Two-wheeler makers have not showed the intent of aligning production with the demand, otherwise inventory levels would have come down,” Kale said at a roundtable with the media on Tuesday.

While most manufacturers have been cutting production since January this year, dealers say a steeper cut in output is required for stock levels to come down to normal at 25-35 days. In July, while Hero MotoCorp had cut production by 15% y-o-y, HMSI’s output were down by 5% y-o-y. The companies had dispatched nearly 6 lakh units, which dealers say are much higher in absolute terms. Bajaj Auto’s output was higher by 2% y-o-y while TVS Motor Company’s production was down by 16% . In the April-June quarter too, production of all manufacturers was down by 10-20%.

During the festive season of 2018, manufacturers pushed stock in anticipation of higher demand but sales remained subdued due to increase in insurance premium and costlier finance. Thereafter, price hikes implemented by companies on April 1 on account of features provided to comply with the new safety norms further impacted demand.

Kale said while high prices and sentiments are blocking sales, speculations over a GST cut is making customers postpone purchases, which the association will raise at the auto retail conclave on Wednesday. “A clarity is required on the GST cut as the confusion is leading to postponement of purchases,” Kale said. He further said the recent measures announced by the government to boost sales are yet to take effect on ground level.

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